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Exhibit 10(a)
NON-QUALIFIED DEFERRED COMPENSATION AGREEMENT
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THIS NON-QUALIFIED DEFERRED COMPENSATION AGREEMENT (the
"Agreement") is made effective as of December 31, 1997, by and between APPLIED
INDUSTRIAL TECHNOLOGIES, INC., an Ohio corporation (hereinafter referred to as
the "Company"), and J. Xxxxxxx Xxxxx (hereinafter referred to as "Xxxxx").
W I T N E S S E T H:
WHEREAS, the Company acquired INVETECH Company, a Michigan
corporation (hereinafter referred to as "INVETECH") on July 31, 1997; and
WHEREAS, pursuant to the terms of a certain Consulting,
Noncompetition and Confidentiality Agreement dated July 31, 1997 (hereinafter
referred to as the "Consulting Agreement") between the Company, Xxxxx, and Oak
Grove Consulting Group, Inc., the Company and Xxxxx agreed to amend a certain
salary continuation agreement between Xxxxx and INVETECH dated March 28, 1991
(hereinafter referred to as the "Salary Continuation Agreement") to provide that
payments thereunder shall be equal to the amount accrued on the Closing Balance
Sheet of INVETECH with respect to said Salary Continuation Agreement plus
$500,000, adjusted for commencement at age 60 using an interest rate of 7.7% for
services previously rendered by Xxxxx; and
WHEREAS, the Company and Xxxxx desire to restate the Salary
Continuation Agreement in its entirety;
NOW, THEREFORE, effective as of December 31, 1997, the Company
and Xxxxx in consideration for, and pursuant to, the terms of the Consulting
Agreement hereby agree to amend and restate the Salary Continuation Agreement as
the Non-Qualified Deferred Compensation Agreement hereinafter set forth.
1. PRIOR SALARY CONTINUATION AGREEMENT. The terms and
provisions of the Salary Continuation Agreement between Xxxxx and INVETECH dated
March 28, 1991, are hereby superseded and replaced in their entirety by the
terms and provisions of this Agreement.
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2. DEFERRED COMPENSATION BENEFITS.
(a) DEFINITION OF RETIREMENT DATE. For purposes of
this Agreement, the term "Retirement Date" shall mean January
1, 2003.
(b) BENEFITS FOLLOWING XXXXX'X RETIREMENT DATE.
Commencing on Xxxxx'x Retirement Date, the Company shall pay
to Xxxxx or to the trustee or trustees under any revocable
living trust agreement executed by Xxxxx as grantor under
which Xxxxx is the beneficiary during his lifetime, a monthly
amount equal to $18,383.00. Such monthly amount shall be
payable on the first business day of each calendar month
beginning on Xxxxx'x Retirement Date and continuing thereafter
until a total of 180 monthly payments have been made. In the
event that Xxxxx shall die prior to receiving 180 such monthly
payments, the Company shall continue to make such payments to
the trustee or trustees under any revocable living trust
agreement executed by Xxxxx as grantor or any other
beneficiary designated by Xxxxx in writing to the Company
until a total of 180 such monthly payments have been made.
(c) BENEFITS FOLLOWING DEATH PRIOR TO RETIREMENT
DATE. In the event that Xxxxx dies prior to reaching his
Retirement Date, the Company agrees to pay to the trustee or
trustees under any revocable living trust agreement executed
by Xxxxx as grantor or to any other beneficiary designated by
Xxxxx in writing to the Company a monthly amount equal to the
amount generated by $1,295,576.00 (which is the sum of
$795,576.00, the amount accrued on the Closing Balance Sheet
of INVETECH for the X.X. Xxxxx Salary Continuation Agreement,
plus $500,000.00) plus interest at the rate of 7.7% annually,
compounded monthly, beginning July 1, 1997 to date of death,
paid over a 180-month period using an annual interest rate of
7.7%, compounded monthly. Such monthly amount shall be payable
upon the first business day of each calendar month commencing
with the first business day of the month following the month
in which Xxxxx dies and shall
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continue until a total of 180 payments have been made.
3. RESTRICTIVE COVENANT. During any period in which Xxxxx
receives payments pursuant to this Agreement, Xxxxx shall not directly compete
with the Company or any of its affiliates nor shall Xxxxx consult with or be
employed by a direct competitor of the Company or any of its affiliates which
does business in any state in which the Company or any of its affiliates is
qualified to do business.
4. FORFEITURE OF PAYMENTS. In the event that Xxxxx violates
the condition set forth in Section 3 of this Agreement, and such violation
remains uncured for 15 days following receipt by Xxxxx of notice of such
violation from the Board of Directors of the Company, then such violation shall
constitute a breach of this Agreement, and no further payments shall be due or
payable by the Company thereafter and the Company shall have no further
liability whatsoever under this Agreement.
5. TREATMENT OF NON-QUALIFIED DEFERRED COMPENSATION BENEFITS.
It is the intention of the parties hereto that the non-qualified deferred
compensation benefits payable under this Agreement will be subject to taxation
under Section 3121(v)(2) of the Internal Revenue Code of 1986, as amended, as of
December 31, 1997 in the amount of $1,337,679.27.
6. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all other agreements, written or otherwise. This Agreement may not be
changed or extended (including additions and deletions) orally or otherwise,
except by an agreement or consent in writing signed by both parties hereto.
7. NOTICE. For all purposes of this Agreement, all
communications including without limitation notices, consents, requests or
approvals, provided for herein shall be in writing and shall be deemed to have
been duly given when delivered or five business days after having been mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive office and to Xxxxx at Xxxxx'x principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of
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change of address shall be effective only upon receipt.
8. GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Ohio, without giving effect to the principles of conflict of laws of such State.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
/s/ J. Xxxxxxx Xxxxx By: /s/ Xxxx X. Xxxxxx
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J. Xxxxxxx Xxxxx Title: Vice President
Date: March 16, 1998 Date:
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